IT Financial Management in IT4IT V2.1A bird’s eye view

April 25, 2017

philippe.geneste@acceenture.com

Lakshmi.malhotra@accenture.com

2

Agenda

• Why IT Financial Management Matters more now?

• IT Financial Management in the Digital World

• How IT4IT standard enables ITFM in the digital world

• Questions

3

Need for IT Financial Management

Today’s CIOs face a difficult balancing act: to achieve high performance they must manage today,

control costs and deliver at increasing pace tomorrow

Run, Grow, Transform IT..• Deliver day-to-day services

• Enhance quality of IT services

• Create more efficient, seamless integration

across services

• Introduce Technology Innovations to create

differentiation

…while controlling costs and driving value• Deliver more with flat or declining budgets

• Maximize business return and value from IT Investments

• Enhance efficiency, effectiveness, productivity, by

removing complexity from the IT portfolio

• Simplify and standardize service costing

In the face of these challenges, IT

organizations need to manage IT

finances in transparent and efficient way

to achieve results:

• Get more bang from the IT buck and drive value through aligning to market trends, to maximize ROI

• Forecast and plan IT budget effectively

• Benchmark your IT spends against the leaders in Industry

• Implement service based costing and data driven investment decisions

• Optimize IT costs and asset management -reduce Unit cost to serve

62% of CIOs do not believe that

there is adequate transparency of IT

costs, contributions and

performance.

74% of IT organizations cannot

clearly define their IT services and

their associated business value.

Source:

Gartner ITScore surveys 2015

The 2015 Gartner CIO survey

81% of IT organizations cant

consistently report/chargeback the

full costs of IT services to business

units

93% of CIOs cannot consistently

apply good benefits realization

practices including benefits

harvesting

4

Scope of IT Financial Management• Manage the preparation of forecasts/budget, challenge

department forecasts as required, ensure forecast numbers

align with company targets.

• Be accountable for the formulation of the 3 year / 5 year

investment plan (company dependent)

• Manage capital expenditure and capital budgeting processes

• Manage IT Financial policies, delegation of authority,

procedures, cost centre structure, project reporting structure• Analyze and report IT spend actuals,

highlight corrective action to ensure

IT delivers to financial plans

• Manage IT service charging

processes both outside and inside IT

• Assess value delivered by IT services

and price IT services.

• Manage regular accounting processes

• Set the requirements for IT financial

systems (e.g. SAP customisations)

• Provide end-to-end view of costs

associated with the entire life cycle

of an IT service

Typically out of scope:

• Tax and treasury management

• Legal entity management

• Asset management

• IT headcount management

• Procure to Pay processing

5

The benefits of strong IT Financial Management

Today’s CIOs face a difficult balancing act, to achieve high performance they must manage today,

control costs and deliver at increasing pace tomorrow

• Enables data driven prioritization of

IT Investments.

• Allows IT to set expectations in an

effective manner through long term

accurate planning

• Enables IT to be run as a business,

for the business

• Provides data points for IT

Optimization: by providing multiple

views on the cost of IT services.

• Provides early visibility of

opportunities or problems so

corrective actions can be taken

• Increases the relevance of IT to the

business through appropriate cost

and value reporting

6

IT Financial Management Maturity

A strategic shift is required in IT investment planning to move focus from “Run the business” and

“Grow the business” to “Transform the Business” projects and services.

Level of Sophistication

Ma

turity

Le

ve

l

Defined

IT as service

provider

InitialIT as Cost

center

Optimized

IT operates as a

value creator

IT operates as a

profit center

Futuristic **

** Futuristic State is an optional maturity level and may be user for IT services in context

where IT is provided to business partners E.g. Franchise Partners for example

* Chargeback Function is optional for IT based on business decision

• Budgeting based on asset classes e.g. software, infrastructure etc.

• Departments have their own systems/manual process for cost capture

• No defined chargeback mechanism

• Investment planning and forecast based on product sets & business units

• Cost information available across the enterprise & reviewed for strategic decisions

• Well defined chargeback based on usage pools [departments…]

• Fixed price not directly related to service cost

• Investment planning linked to a service catalog

• End-to-end integration of service costing to identify true TCO

• Automated chargeback mechanism enabling cost recovery tracking

• Investment decisions based on business value of service

• Sophisticated analytics engine proposing insights for optimizing costs

• Service Priced to create profit for funding IT Budgets

7

Which level is your IT organization ready for

Assessing target maturity level can be tricky, It depends on the overall maturity of the IT

organization.

Traditional IT Organization:

• Has a legacy core and

operations

• Builds incrementally upon

existing infrastructure and

services

• IT is seen as a cost center

• Delivery speed is perceived as

slow

Multi-speed IT Organization:

• Has a hybrid core and

operations

• Builds incrementally on core

and innovates on consumer

experience.

• IT is seen as a service center

Digital IT Organization:

• Has cloud based core and

operations

• Links external and internal

capabilities to Innovate on

core services as well as

consumer experience.

• IT is seen as a value creator

• Delivery is with Agile methods

• Speed perceived as fast

Traditional IT Multi-speed IT Digital IT

8

Agenda

• Why IT Financial Management Matters more now?

• IT Financial Management in the Digital World

• How IT4IT standard enables ITFM in the digital world

• Questions

9

How does ITFM work in Organizations at initial maturity

stage

Currently, ITFM tools bring data from disparate systems to a

consolidated data store to provide capabilities to analyze IT

investments and spends

• Dependency on ITFM tools – ITFM tools are

typically used in large organisations and require

significant effort and cost to implement

• Focus on managerial accounting – At present

ITFM in organizations focus on managerial

accounting driven by the needs of corporate

finance

• Fixed budget - Budget is often fixed, lacks

flexibility and is focused more on running the

business & product management than on

enterprise strategy

• IT viewed as a cost center - IT organization,

currently, is viewed as a cost center and doesn’t

focus on the value IT investments can bring to an

enterprise

• Limited cost transparency - The current view of

IT costs provides very limited visibility. Cost

tracking in these organizations is done by the

project and there is no view of the Total Cost of

Ownership (TCO) at the service level

Issues/ChallengesCurrent ITFM state

10

What should ITFM look like in the Digital world

For CIOS, the focus now is to reinvent the Enterprise IT to convey business value in the midst of

a Digital Revolution. To truly improve business outcomes CIO’s need a more mature IT Financial

Management

Service

• Maintain an authoritative list of all IT investments and

measure the ROI of each investment

• Enable CAPEX vs. Opex decisions

• Track total cost of ownership for each service

• Define the offer catalog for all services offered

internally or externally (or as a mix of both)

• Chargeback based on consumption and price

• To implement pricing models, organizations

often start with a simple mechanism where price

equals to cost.

Costing

Budgeting

Chargeback & Pricing

11

Agenda

• Why IT Financial Management Matters more now?

• IT Financial Management in the Digital World

• How IT4IT standard enables ITFM in the digital world

• Questions

12

IT4IT Standard enables end-to-end traceability to

accelerate you ITFM Journey

Service Lifecycle:

13

IT4IT Standard enables end-to-end traceability to

accelerate your ITFM Journey

Stages of Service Lifecycle:

Servitize Everything Track costs Here

Aggregate costs at each

lifecycle stage to

understand TCO

Build service budgets at

required level of detail

1 3

2

4

14

IT4IT Standard enables end-to-end traceability to

accelerate you ITFM Journey

Service Lifecycle:

Service

Portfolio

Component

Portfolio

Demand

Component

Proposal

Component

Policy

Component

Defect

Component

Requirement

Component

Project

Component

Test

Component

Build

Component

Source Control

Component

Change

Control

Component

Problem

Component

Incident

Component

Event

Component

Diagnostics &

Remediation

Component

Usage

Component

Chargeback/

Showback

Component

Strategy to

PortfolioRequirement to Deploy Request to Fulfill Detect to Correct

Offer Mgmt.

Component

Offer Consumption Component

Service

Archi-

tecture

PolicyRequire-

ment

Scope

Agree-

ment

IT

Initiative

Portfolio

Backlog

Item

Source

Concep-

tual

Service

Logical

Service

Test

Case

Defect

Offer

Service

Release

Build

Service

Catalog

Entry

Desired

Service

Model

Usage

Record

Fulfill-

ment

Request

Sub-

scription

Charge-

back

Contract

Request

Problem/

Known

Error

Incident

Event

Service

Monitor

Run

Book

RFC

Service

Monitoring

Component

Catalog

Composition

Component

Shopping

Cart

Enterprise

Architecture

Component

Service

Design

Component

Fulfillment

Execution

Component

Request

Rationalization

Component

Configuration

Management

Component

Release

Composition

Component

Service Level

Component

Service

Contract

Actual

Service

Build

Package

Build Package

Component

Service

Release

Blueprint

IT4IT Reference Architecture L1 V.2.1Service

Archi-

tecture

Enterprise

Architecture

Component

Policy

Component

Policy

Proposal

Component

Scope

Agree-

ment

Service

Portfolio

Component

Concep-

tual

Service

Project

Component

IT

Initiative

Logical

Service

Service

Design

Component

Service

Release

Release

Composition

Component

Service

Release

Blueprint

Service

Catalog

Entry

Catalog

Composition

Component

Desired

Service

Fulfill-

ment

Request

Fulfillment

Execution

Component

Offer Mgmt.

Component

Offer

Usage

Component

Usage

Record

Configuration

Management

Component

Actual

Service

Service

Monitor

Service

Monitoring

Component

Sub-

scription

Request

Request

Rationalization

Component

Chargeback/ Showback

Component

Charge-

back

Contract

Charge-

back

Record

Portfolio

Demand

ComponentPortfolio

Backlog

Item

15

IT Investment Portfolio

Aligning business with IT and data driven decisions empower IT organizations to track actuals

against budgeted costs.

Service

Portfolio

Component

Portfolio

Demand

Component

Proposal

Component

Policy

Component

Defect

Component

Requirement

Component

Project

Component

Test

Component

Build

Component

Source Control

Component

Change

Control

Component

Problem

Component

Incident

Component

Event

Component

Diagnostics &

Remediation

Component

Usage

Component

Chargeback/ Showback

Component

Strategy to

PortfolioRequirement to Deploy Request to Fulfill Detect to Correct

Offer Mgmt.

Component

Offer Consumption Component

Service

Archi-

tecture

PolicyRequire-

ment

Scope

Agree-

ment

IT

Initiative

Portfolio

Backlog

Item

Source

Concep-

tual

Service

Logical

Service

Test

Case

Defect

Offer

Service

Release

Build

Service

Catalog

Entry

Desired

Service

Usage

Record

Fulfill-

ment

Request

Sub-

scription

Charge-

back

Contract

Request

Problem/

Known

Error

Incident

Event

Service

Monitor

Run

Book

RFC

Service

Monitoring

Component

Catalog

Composition

Component

Shopping

Cart

Enterprise

Architecture

Component

Service

Design

Component

Fulfillment

Execution

Component

Request

Rationalization

Component

Configuration

Management

Component

Release

Composition

Component

Service Level

Component

Service

Contract

Actual

Service

Build

Package

Build Package

Component

Service

Release

Blueprint

Charge-

back

Record

Finance

IT Investment

PotfolioIT

Budget

Item

IT Financial Management

Sourcing & Vendor

Management(External to IT)

Cost Modeling

IT Cost

Model

BenchmarkingPrice

Modelling

Price

Model

IT Asset Management(External to IT) Supportive Function

Engagement Experience Portal

User

Profile

Portfolio

Demand

ComponentPortfolio

Backlog

Item

Proposal

Component

Scope

Agree-

ment

Service

Portfolio

Component

Concep-

tual

Service

Service

Catalog

Entry

Catalog

Composition

Component

Finance(External to IT)

IT Investment

PotfolioIT

Budget

Item

Clear view of IT Budget forecast

and actuals for every service in

service catalog

Investment PortfolioPrioritized

business

demands

Proposed

Scope and

budget

Scope linked to

service portfolio

Proposal ComponentPortfolio Demand

New demands

from business

Service Portfolio Catalog Composition

Budgeting Inputs such as

3rd Party service costs,

Facility costs etc.

Finance

Budget

Request &

Approval

Service

portfolio linked

to Service

catalog

Approved Service Budget

Actual Service Costs

Operations

Continuity

Budgets

demand

Change

Requests

(from D2C)

1

2

34

5

6

7

ILLUSTRATIVE

16

Service

Portfolio

Component

Portfolio

Demand

Component

Proposal

Component

Policy

Component

Defect

Component

Requirement

Component

Project

Component

Test

Component

Build

Component

Source Control

Component

Change

Control

Component

Problem

Component

Incident

Component

Event

Component

Diagnostics &

Remediation

Component

Usage

Component

Chargeback/ Showback

Component

Strategy to

PortfolioRequirement to Deploy Request to Fulfill Detect to Correct

Offer Mgmt.

Component

Offer Consumption Component

Service

Archi-

tecture

PolicyRequire-

ment

Scope

Agree-

ment

IT

Initiative

Portfolio

Backlog

Item

Source

Concep-

tual

Service

Logical

Service

Test

Case

Defect

Offer

Service

Release

Build

Service

Catalog

Entry

Desired

Service

Usage

Record

Fulfill-

ment

Request

Sub-

scription

Charge-

back

Contract

Request

Problem/

Known

Error

Incident

Event

Service

Monitor

Run

Book

RFC

Service

Monitoring

Component

Catalog

Composition

Component

Shopping

Cart

Enterprise

Architecture

Component

Service

Design

Component

Fulfillment

Execution

Component

Request

Rationalization

Component

Configuration

Management

Component

Release

Composition

Component

Service Level

Component

Service

Contract

Actual

Service

Build

Package

Build Package

Component

Service

Release

Blueprint

Charge-

back

Record

Finance

IT Investment

PotfolioIT

Budget

Item

IT Financial Management

Sourcing & Vendor

Management(External to IT)

Cost Modeling

IT Cost

Model

BenchmarkingPrice

Modelling

Price

Model

IT Asset Management(External to IT) Supportive Function

Engagement Experience Portal

User

Profile

IT Service Costing – Service Subscription

IT4IT framework connects various consumers with goods and services they need and fosters

service consumption and fulfilment

Service

Catalog

Entry

Catalog

Composition

Component

Sub-

scription

Request

Request

Rationalization

Component

Chargeback/ Showback

Component

Charge-

back

Contract

Charge-

back

Record

Desired

Service

Fulfill-

ment

Request

Fulfillment

Execution

Component

Service

Monitor

Service

Monitoring

Component

User

Profile

Engagement Experience Portal

Service Monitoring

ChargebackEngagement

Experience Portal

Service Bundled

into Offers

Service

subscribed by

business users

Contract details

terms for

Chargeback

Service Fulfilment

instantiates service

monitorCatalog

Composition

Request

Rationalization

Instance

Listing of all

IT services

including 3rd

Party

Services

Listing of

bundled

services

offered to

users

2

1

ILLUSTRATIVE

Subscribed services are

delivered to the consumer

and service consumption is

monitored

Fulfillment Execution

service monitor

3a

3c

3b

A desired service is

created for each

subscription

17

IT Service Costing (Development) - Chargeback

IT4IT uses the Service Backbone to establish transparency in cost flows for services offered by

IT Organizations

Service

Monitor

Service

Monitoring

Component

Chargeback/ Showback

Component

Charge-

back

Contract

Charge-

back

Record

Service

Portfolio

Component

Concep-

tual

Service

Usage

Component

Usage

Record

Project

Component

IT

Initiative

Service Usage/

Subscribed

Service

Chargeback

Accumulates the actual charge

of the subscribed services

based on usage, invoice

Costs can be consolidated at

any level of service backbone

giving end-to-end cost visibility

Service Monitoring Usage

Contract details terms

for Chargeback of

subscribed services

Service monitors created

for subscribed services

Usage

Collection

1 2

ILLUSTRATIVE

Service Portfolio

Chargeback

Actual

Spend

3

Determines and tracks the

Total Cost of Ownership

(TCO) of a service

Project

Chargeback

Record

4

18

IT Asset Management

IT Asset management ensures optimal utilization of assets and correct valuation of period costs

of assets in use

Note: The function of IT Asset Management is not

included in RA v2.1 and is still work in progress

Usage

Component

Usage

RecordService

Monitor

Service

Monitoring

Component

Finance(External to IT)

IT Asset ManagementSupportive Function

Usage Finance

IT Asset Management Purchased Assets (from

Sourcing & Vendor

Management)

Service Monitoring

Asset health and

Utilization Depreciation

Rules

Invoice for capital

Investments e.g. servers

(from Sourcing & Vendor

Management)

Request for asset

expensed cost

Input: Invoice for

capital investments,

period

Depreciated Asset

Costs per period

Keeps track of utilization

and asset health. Interacts

with capacity management

capability to optimize

assets (incl. hardware and

software licenses)

2

3 1

4

6

5

ILLUSTRATIVE

19

IT Financial Management – Progress so far

IT Financial

Management

20

IT Financial Management - Documents

• IT4IT Pocket Guide – This document provides an in depth view on the IT4IT

Reference Architecture. It describes a reference architecture illustrated by an IT Value

Chain necessary to manage the business of IT. IT Financial Management

recommendations are incorporated as a part of IT4IT 2.1 standard.

• Scenario documents – This document provides a walkthrough on how service

costing is calculated and tracked across the service lifecycle for a pure service and

hybrid service with the help of a hypothetical scenario

Pure Service Scenario

Hybrid Service Scenario

• Guidance Paper – This document provides the major concepts of IT Financial

Management

21

Table of Contents

• What’s the need for ITFM

• Journey of ITFM to the digital world

• How IT4IT standard enables ITFM in the digital world

• Questions

22

Questions?